New Delhi: Former Reserve Bank Governor C Rangarajan has said that RBI alone cannot control inflation as supply matters need to be managed by the government.
In a letter titled ‘New Monetary Policy Framework — It Means’, Rangarajan has discussed the RBI’s limits on containing inflation. “The target set for inflation should have a scope and time frame for its adjustment and it should not be too short-term,” he said.
Rangarajan said, “In spite of all this, monetary policy should work regardless of the things that are going to encourage inflation. Clearly, supply management is needed in the supply related issue and it should be the responsibility of the government. “
He said that the idea that the inflation target has been adopted in the country has raised many doubts and worries. “Under the new monetary policy framework, the Reserve Bank has to increase the consumer price index based inflation by 2 percent to 4 percent level. Need to be maintained. Rangarajan said, “So in a way it is a flexible goal.
An amendment was made in the RBI Act to set up a Monetary Policy Committee which would determine the policy rate keeping in mind the inflation target. “He said that the focus on keeping inflation in line with the target is not that growth and Other goals such as financial stability should be ignored. It is noteworthy that in 2016, the Government set up a Monetary Policy Committee to formulate policy. A six-member committee headed by the Governor of the Reserve Bank decides on the basis of voting.